How to Get a Car Loan Without Credit History

1. Get a Cosigner

Asking a loved one to cosign your loan application can improve your approval odds and also make it easier to secure better terms than you can get on your own.

When you apply with a creditworthy cosigner, meaning someone with a good credit score and stable income, they're agreeing to pay off the loan in the event that you no longer can. This arrangement makes the loan less risky for the lender than if you were to apply by yourself.

Before asking someone to cosign your application, however, it's important to make sure they understand their roles and responsibilities. They should also understand that the loan will show up on their credit report, potentially impacting their credit score and debt-to-income ratio.

Learn more: Should You Get a Cosigner on a Car Loan?

2. Make a Large Down Payment

Having no credit history means lenders don't have sufficient information to determine how likely you are to repay your debt. Many financial institutions are unwilling to take that risk.

Some lenders may be willing to work with you if you make a sizable down payment on the purchase, however. The more you put down, the less you'll need to borrow, and a lower loan amount reduces the risk of default for the lender. It also results in lower monthly payments and less interest costs for you.

What's more, a large down payment can indicate that you're serious about keeping the vehicle, which translates to a greater likelihood of on-time payments.

Learn more: How Much Is a Down Payment on a Car?

3. Reach Out to Your Bank or Credit Union

In some cases, community banks and credit unions may be willing to relax requirements for existing customers, especially if you have a long history with the financial institution. You may even be able to point to other on-time payments from your bank account, such as rent, utilities and insurance payments.

If your bank or credit union won't work with you, you can research and compare online lenders and even check with local dealers to see if they have options for car buyers with no credit.

That said, it's important to steer clear of buy here, pay here financing, which is a form of in-house dealer financing. These loans often don't require a credit check, but they can be incredibly expensive. What's more, dealers typically don't report on-time payments to the credit bureaus—though they may report late payments—which won't help you build a credit history.

Frequently Asked Questions

Consider Building Credit Before Applying for an Auto Loan

If you don't need a vehicle urgently or you don't have a creditworthy cosigner, it can make sense to work on establishing a credit history before you apply for an auto loan.

Experian Go^™ is a free program that can help you establish a credit profile, better understand how credit works and even give you an opportunity to get credit for certain bills you already pay. You'll also get free access to your FICO^® Score^☉ and Experian credit report, which you can use to track your progress and learn about how your actions affect your credit standing.